Portland mulls foreclosures for 1st time in 50 years

PORTLAND, Ore. (AP) — City officials in booming Portland have developed a plan to foreclose on so-called “zombie homes” for the first time in 50 years as the city grapples with a swelling population and skyrocketing home costs that threaten to lock new homeowners out of the market.

The City Council is scheduled to vote Wednesday on whether to foreclose on five of the city’s worst abandoned properties, the first part of a long-term plan to free up housing in an overheated market while clearing out squatters who have plagued developing neighborhoods outside the city’s hip core for years.

Council members will also vote on whether to alter city code so Portland can sell a foreclosed property for its market value and not just for what’s owed in liens.

The idea of cities buying up blighted properties isn’t new, and Portland looked to metropolises like Baltimore or Detroit while devising its plan. But unlike those cities, which were hit hard by the recession, Portland is bursting with newcomers and housing demand has far outstripped supply. Portland home prices are going up 11 percent year over year and 1,000 new people move to the city every month, Mayor Charlie Hale said.

“It’s fundamentally crazy that we have houses sitting empty in a market where a ‘For Sale’ or a ‘For Rent’ sign would cure that by tomorrow morning,” Hale said. “We’ve got to light up every single one of these homes with people living in them.”

Portland hasn’t foreclosed on anyone since 1965, when a single mother sued after officials took her home over a $28 sidewalk nuisance fee. That episode chastened the city, which reversed course so dramatically that Hale wasn’t even aware it had a foreclosure manager on its staff.

In the five decades since, Portland has essentially operated as a collections agency, putting delinquent owners on payment plans for unpaid liens and boarding up vacant homes.

The sharp policy shift, while a boon for frustrated neighbors, has some residents nervous about potential abuses of power. The city will only take on documented vacant and abandoned homes, but some wonder what would prevent the city from foreclosing on any property that generates too many complaints.

In the Lents neighborhood, where some “zombie homes” are on the city’s list, 1,000 homes were razed through eminent domain for the construction of Interstate 205 in the 1980s and that suspicion lingers.

In these narrow blocks of aging, post-World War II homes, Portland’s national reputation as a trendy and edgy mecca seems lost amid vacant lots overrun with weeds, sagging bungalows and chain link fences.

“In a neighborhood like ours, it’s going to be a sort of divisive issue,” said Cora Lee Potter, land use chair for the Lents Neighborhood Association on the city’s far eastern edge. “Everywhere you see I-205, there used to be four or five city blocks of housing there.”

Chad Stover, a livability project manager on the mayor’s staff, emphasized that the city wasn’t taking action to make profit, but to restore neighborhoods and bolster housing supply. There are probably hundreds of vacant and abandoned homes citywide that could eventually qualify, he said.

“We are certainly cognizant of anything that pertains to housing right now in the city — and always will be — and the specific homes we’re focusing on are the vacant and abandoned homes,” he said. “It’s very important that we say that over and over again. We’re not going after the ones that have anyone living in them.”

The city is starting out small with five homes on its foreclosure wish list, but the mayor’s office has passed a list of 25 or 30 more to the foreclosure manager for review after working with police and residents.

Police have a list of about 430 properties that generate chronic nuisance calls for officers, but many of those may be occupied and thus not eligible, Stover said.

The first five homes face foreclosure, but future vacant homes could be placed into a third party receivership, in which case a nonprofit would renovate and resell the home at an affordable price.

City officials and guests, including a realtor, toured some “zombie homes” last week and saw their potential, Stover said.

“We’re facing this unprecedented housing crisis and we need to be proactive,” he said. “There are a couple of homes there that could easily go for at least $275,000 because of where they were.”

One of those homes is less than a mile from Bob Wheeler’s place, where he lives in the same house his parents bought nearly 60 years ago.

The fragrant pink, yellow and red roses he planted for his late mother still spill over his chain link fence, but the house two doors down was gutted by fire when his neighbors died and squatters moved in.

“It’s a shame, that’s what it is,” he said. “This was a nice home.”

It may well be again: the property is on a priority list, with $41,000 in unpaid liens outstanding.